Here's the good news. The economic pie is growing again. Growth in the 4th quarter last year hit 3 percent on an annualized rate. That's respectable -- although still way too slow to get us back on track given how far we plunged.
Here's the bad news. The share of that growth going to American workers is at a record low.
That's largely because far fewer Americans are working. Although the nation is now producing more goods and services than it did before the slump began in 2007, we're doing it with six million fewer people.
Why? Credit technology. Computers, software applications, and the Internet are letting us produce more with fewer people.
In theory, this is a huge plus. We can live better and have more time off.
But as Tonto asked the Lone Ranger, "who's 'we,' kemosabe?"
The challenge at the heart of the productivity revolution -- and it is a revolution -- is how to distribute the gains. So far, we've been failing miserably to meet that challenge.
True, some of the gains are widely spread in the form of lower prices and higher value. My 3-year-old granddaughter gets more out of an iPhone in five minutes than my 98-year-old father ever got out of reading the daily paper (putting to one side their relative capacities to process the information).
But many of the gains are distributed narrowly in the form of profits to owners, and fat compensation packages to the "talent."
The share of the gains going to everyone else in the form of wages and salaries has been shrinking. It's now the smallest since the government began keeping track in 1947.
If the trend continues, inequality will become ever more extreme.
We'll also face chronically insufficient demand for all the goods and services the productivity revolution can generate. That's because the rich save more of their earnings than everyone else, while middle and lower-income families -- with fewer jobs or lower wages -- no longer have the purchasing power to keep the economy going at full tilt. (Before 2008 they kept up their buying by sinking deep into debt. This proved to be an unsustainable strategy.)
Insufficient demand -- as everyone but regressive supply-siders now recognize -- is a big reason why the current recovery has been so anemic and the pie isn't growing faster.
So while the productivity revolution is indubitably good, the task ahead is to figure out how to distribute more of its gains to more of our people.
One possibility: higher taxes on the rich that go into wage subsidies for lower-income workers, combined with job sharing.
We also need better schools (from early-childhood through young adulthood, followed by systems of lifelong learning) so everyone has a fair shot at a larger share of the gains.
Finally, the benefits of the productivity revolution should be turned into more abundant public goods - cleaner air and water, better parks and recreation, improved public health, and better public transit.
Regressive right wingers want Americans to believe we've been living beyond our means, and can no longer afford it.
The truth is just the reverse. Most Americans' means haven't kept up with what the economy could provide - if the fruits of the productivity revolution were more widely shared.
Regressives growl about America's borrowing and tut-tut about future federal budget deficits. The reality is the world is willing to lend us vast amounts of money because we're so productive. And the productivity revolution is making us ever more so.
Get it? The pie is growing again but most people aren't getting much of a slice. That's bad even for those getting the biggest pieces. They'd do better with smaller slices of a pie that grew much faster.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Who is going to run this wage subsidies program? if the federal government runs it, it seems like it could be a way for an administration to influence how people vote and using money to influence votes isn't a good thing.
And what do you mean about job sharing? Companies aren't hiring so the only way to do this is to get companies to take one existing job and make it two jobs. If this happens, you will have two people working, but each job will pay less to each worker than the one job it replaced. And the two workers might end up needing government assistance whereas the person who used to have the one job, didn't.
But we don't have to worry about the increased government spending that job sharing will cost because other countries will keep lending us money and lending us money.
Yes, the price of post-secondary education should be lower. When I went to college in the mid- and late-1960s, our in-state tuition was very low and it was obvious that educating people was in society's interest. Also, we had NDSL (National Defense Student Loans) at 3% interest. If a person became a teacher in grades K-12, the loan would be forgiven at 20% per year and finished after 5 years of teaching. The bank loans that students have to take out these days are unbelievable. How do students and their families face that horrendous debt after college graduation (if they graduate that is)?
I wouldn't go to a 4-year college now unless I was entering a profession known to have high financial prospects. Otherwise, it's a scam, and you'd be in debt forever.
The real middle class income began its decline in the mid-1970s. After that, it was smoke and mirrors to keep citizens believing.
That middle class lifestyle came about because post-WWII (1945), the U.S. was on top of the world with most of the industrialized world bombed to smithereens. That's over. It's not coming back.
As Mr Reich observes, the shrinking share of wealth retained by the middle class threatens our native economy's capacity to sustain. It also is, in my view, the biggest single threat to Social Security. As less wealth stays with those who earn less than the 'cap', the funds that form the safety net are also being limited. This too will be unsustainable, unless the cap be raised faster, or removed completely. Does anyone really believe this isn't part of the grand old plan?
..fanned
While Democrats may be congradulating themselves on marginal economic improvement, it's no cause for celebration! There are fundalmental problems in the country that are not being addressed! Beginning with a banking industry that has hoodwinked America! Neither Obama or his possible GOP general election opponent have addressed the issue of "nominal lender loans" made by Wasington Mutual prior to their purchase by J.P. Morgan Chase! Perhaps it due to Chase making major contributions to both the Romney and Obama election campaigns! A Wall Street type like Mitt Romney won't compromise his biggest single contributor! But what about the President? Is he really for the middle class? He talks a good game! But why hasn't he taken the lead?
In short, America needs leadership. Neither Barack Obama or Mitt Romney can deliver. The losers are the American people. Obama supporters conclude that he is "the greatest thing since canned beer." But his accomplishments have been "marginal at best." His energy policies, in Condoleeza Rice's words are nothing more than " a vehicle of punishment for the poor and minorities." He seems open to "selling out" private sector unions. This could be a mortal miscue! Jimmy Carter learned this in 1980. We all remember how that election turned out!
Obama is afraid. Afraid of the extremes Republicans seem hell bent on. We're all afraid of that. Not one intelligent American is denying what the greed and extremism from the Corporate Giants and the GOP have done to this nation. No one else is to blame. In my opinion, if Obama went strong Left and stayed there, he'd overwhelm the nation with joy, & a sure win in November. Open-minded, forward thinking voters would take a huge sigh of relief. We need that. But no. FEAR stops it! Pure and simple.
We need an activist opposition party.
I've been searching far and wide for a wise $50 an hour Western economist who could name me
one economic idea - ideally on the subject of Free Trade - which can't be delivered into Western
universities by equally competent economists working via a video-link from Bangalore for just $5
an hour... Imagine, one lousy idea - everyone clams up!
I'm sure your widely respected Dr. Reich should be able to oblige with such an idea - or perhaps even a couple...
M.G.
Thomas Jefferson. “Progressive taxes are required to prevent a permanent rich aristocracy that then buys government and ends democracy as happened in England ” ..
This happened under the robber barons which repub policies return us to, and not unlike now.
"As riches increase and accumulate in few hands . . . the tendency of things will be to depart from the republican standard." Alexander Hamilton
Ab Lincoln: "I hope we shall crush ... in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country".
Justice Brandies: “ You can have great wealth or democracy, you can have one or the other,but not both” .
The founders were Locke liberals fighting the Burke conservative 1000 richest families of the British Empire. Our founding fathers were secular progressives. The Conservatives , called Tories were on the side of King George and Aristocracy. Somethings never change.
-Herbert Hoover
The assembly lines of the industrial revolution led to a surplus of labor. Not a new problem. nevertheless, companies had workers working 70 hour weeks for peanuts, because if they didn't they could be replaced and the worker had no choice, if he quit, his family starved. Increased productivity was not shared. It all went to 400 Families for the most part.
Unions/the government corrected that problem by lowering the work week to 40 hours, raising wages/overtime. That created more demand and more buying power, raised the need for more workers to produce more. This created leisure time and leisure industries, more jobs.
Repubs wrong as usual said this would destroy the country.
Instead it created a middleclass and people wth spare time to create other businesses/more entrepreneurs.
When FORD tripled wages and cut hours to 40, The Robber Barons railed against him!
There is now a PERMANENT surplus of workers, skilled and educated worldwide and will always be, with robotics and computers. Pre1900 ideas of libetarians in that reality are a JOKE.
The EU , such as Germany has reduced hours, increased wages,as we did 80 years ago.
That solution along with ending outsourcing as in all other countries, must be done again, or we do the repub race to the bottom that is already a failure in Red states.
Regards
This is not producing, but another form of usury that our banking systems have consigned to the businesses that are producing, making sure like the mafia they can collect on the hard work of others.
So they took the model from the Wizard of Oz, rolled the straw man, the tin man, and the lion into one big brainless, heartless, cowardly entity called the corporation, got the Supreme Court to declare it a human equivalent, and used it to lord over mankind. That solves the problem of that profit sucking human quality called empathy. Of course, the initial model required that they pull a few humans along with it (high achievers, aka greed mongers), but that will be fixed over time.
Anybody see a problem with all of this?
But tell me god want's it this way, liberals are the devil, abortion is bad, Obama is a muslum, and you can beat me and steal whatever I have left.